The Stoler Report with Michael Stoler: Darrell Handler

0:00 Speaker 1 Good morning. This is Mike Stolar for the Stolar Real Estate Report. Real Estate is a generational business. Many real estate families have been involved with real estate, first, second, third, fourth, and even fifth generation. Today. I have I think it would be the fourth generation, correct, okay, of a real estate family who are owners and operators of office buildings

0:24 in Midtown as well as involved in residential apartment housing in Hudson Valley and around the country. I have Daryl Handler, who is the president of Handro real Estate and also the co founder of Arena Capital Corp. Yes, okay, So tell me what Arena Capital Corp. Is.

0:44 Speaker 2 So, Arena Capital is a fully integrated owner, operator developer of largely multi family, but multi family and mixed use properties starting about an hour north of New York City and beyond so call at north Westchester to around Albany.

1:03 Speaker 1 How did you decide on that market?

1:06 Speaker 2 You know, it’s kind of funny. I was. It was the depths of COVID. I was stuck in New York City. I was walking to the office every day and it was pretty dire. It was a twenty block walk and I would see nobody on the streets, and I would see no cars and I was just going to the office every day and I needed to

1:26 touch grass and get some fresh air. I had, randomly, I’d been up to the Hudson Valley many times in my life, but i’d randomly, in the moment booked an airbnb upstate and just to kind of just change it up and you know, for peace of mind. And when I was up there, there was so much going on.

1:44 There was you know, the streets were bustling, the it was great coffee shops and nice cars and and great shopping and amazing restaurants. And it kind of dawned on me, like, you know, I really wanted to do something that was outside of office leasing, and I wanted to do that for a very long time. It was a kind of

2:02 an aha moment that you know, this was, you know, sort of an hour two hours away from where I lived, and it was a lot going on. So I had put together My first deal.

2:12 Speaker 1 Was the deal.

2:13 Speaker 2 It was a fourteen unit apartment building in Kingston, New York, and I had heard about it through a friend and off market, and you know, the numbers made sense. So I put a deal together with friends and family money, and we bought that deal and I want to say middle end of twenty twenty maybe early to twenty twenty one,

2:35 and we were off to the races, so, you know, we were we you know, I’d been looking at markets for a long time, but that was sort of like a kind of punched me in the nose.

2:47 Speaker 1 And you know, but you had never really been involved with the community up there, no.

2:52 Speaker 2 Other than going there, you know, from time to time throughout you know, my childhood or young adulthood. And but no, it was it was sort of I wouldn’t say completely random, but it was on the random side.

3:04 Speaker 1 So what do you see as the opportunities in the Hudson County.

3:07 Speaker 2 Yeah, I think that there is a lack of there’s a tremendous lack of new supply there. There’s a lot of you know, a lot of inbound migration there due to COVID, But even before COVID, there was a great renaissance of the Hudson Valley sort of. I always say, it’s sort of like the Brooklyn you know, the Brooklyn

3:25 vacation and hipster sort of movement had happened at the same time it was happening in Williamsburg. Is happening up there because the same community of creatives who you know made Williamsburg super cool. They weren’t going to the Hamptons, they weren’t going to the Jersey Shore. They were looking for a sort of a more creative community that they

3:46 can call their own. So there was a lot of you know, when at our sales going into COVID, then COVID had happened, and that displacement helped out the market, you know, tremendously.

3:58 Speaker 1 And what if you had been doing recently up in the Hudson.

4:00 Speaker 2 Can we we have a massed a portfolio of you know, largely multi but there’s definitely some mixed use aspect to our portfolio. Uh. And we have bought in many of like the major river towns along the Hudson Valley. There’s a huge portion of our portfolio that’s you know on main Street, so real walk ability, real you know, triple A locations within

4:24 the context of those markets, as well as like you know, pure workforce housing.

4:30 Speaker 1 Okay, so where are the opportunities.

4:33 Speaker 2 You know, we we we were really bullish on the you know, the river towns along the Hudson. Hudson we we we we spent a lot of time in the Hudson, New York. We spent a lot of time Soberty Beacon.

4:46 You know, we are spending a lot of time in Dutchess County in general, a large and uh we you know, we’re we’re exploring some additional markets, you know, we we we’ve we’ve spent a lot of time in Albany and and the surrounding markets there, and a couple of markets that are east of the river as well.

5:04 Speaker 1 What about the rent freezes and the regulations would effect on.

5:09 Speaker 2 Yeah, so you know, in the state of New York, it’s not you know, it’s not you know, statewide rent control or rent stabilization. There are certain markets that get effected. You haven’t been affected by it that we have navigated.

5:22 We steer clear of that as much as we can. There is good cause in a lot of these markets, good cause eviction, which is you know, I think important protection for the tenants, but also you know, you can navigate through uh, you know, throughout that you know, on the business front front.

5:37 Speaker 1 And now let’s take the hat back to the handler. Absolutely tell me what’s going on in the office market.

5:44 Speaker 2 So, in the office market at large, I think it has been as hot as it’s been since I’ve been in the industry. You know, good space in any submarket is leasing fairly quickly and at a at an increased rent comparably we were year or two years ago. You know, half of that is just purely the market. I think

6:03 we’re from home. Some tenants still do that, but there’s a lot of tenants that don’t. There’s an aspect of it that there’s a less you know, a smaller denominator of opportunity or options. So like there’s a supply shock, you know, the demand is up and the supplies down due to you know, conversion to REZI or you know

6:22 largely that there’s been you know, I think fifteen plus million square feet of REZI conversions, which will I think will only increase.

6:31 Speaker 1 So what’s happening in the buildings is they do own.

6:35 Speaker 2 We’re very least, we’re extremely occupied. We’re probably ninety seven ninety eight percent occupied throughout the you know, across the board. You know, we’re we’re we I always say that, you know, in our sub market, we’re a premier option. So you know, we are not the Plaza District Triple A new buildings, but we are within our sub market, which is you know,

6:55 transit oriented, value oriented tenants and and just a total market at large. I always think that we are offering the best, uh you know, best quality in those markets. So we’ve been able to attract great tenants at at a rent that’s not as what we were getting in twenty nineteen, but certainly a healthy rent. And you know,

7:16 we we have very little vacancy and I think that’ll continue.

7:22 Speaker 1 And on the pure brokerage business, what’s going on with you?

7:26 Speaker 2 And yeah, so we spend a lot of time, you know, doing you know, transacting throughout the city, not just specifically in the market Midtown West, and we do a lot of work in Soho, a lot of work in the Plaza district. And I think the story is sort of the same throughout any submarket. The top quality options are

7:44 leasing at a at a great premium and at a really rapid pace. And there’s there’s a huge need for you know, high end built space like you know, if if a space you know pre COVID handro particularly, We never pre built anything, We never furnished anything before the attraction was come to our buildings and we’ll custom build

8:07 the space to you how you want it, and you know that was gonna that’s gonna take a you know, six to nine month lead time and plan ahead and you know you’ll move in a year from now or whatever it was. Now it’s we want space, we want space, you know tomorrow. We want to build. We want to

8:22 furnish one at high end. And so you know in you know, in let’s call it Midtown South, you know, in bigger floor plan or floor plates that were never sort of pre built before the pre built ones are moving rapidly and in many cases there’s you know, there’s a you know, a competition to get the best space

8:40 in the market.

8:41 Speaker 1 What about sharing.

8:43 Speaker 2 It’s interesting, like you know, I think that there was way too much of it pre COVID, and maybe there was a market for too but you know now, you know, five years after COVID, a six year after COVID, it’s it’s still it’s still a very important, I think piece of the puzzle of the market. Where there’s tenants that

9:01 are either have a hub here or they’re still too young or mason to have their own office that needs something and they want to not be in their apartment and they want to you know, be have some flexibility.

9:13 So I think there’s a huge need for it going forward. I think maybe there was there was a little too much that kind of got you know, worked out through you know, the market over the last five years. But you know, I think that you know, you know, before there was you know, dozens of providers. Now there’s you know,

9:27 three or four providers that I think have done a really good job and have you know, pretty substantial and high occupancy.

9:34 Speaker 1 So overall it sounds like things are pretty good up in the Hudson County.

9:39 Speaker 2 Yeah, yeah, we’re bullet we’re very bullish on the on the region.

9:43 Speaker 1 The office market in New York is very strong today.

9:46 Speaker 2 I would say so yeah. I’m you know, I think, you know, now more than ever it’s been you know, I always say, like, you know, the last five or six years has been challenging. You know, last year and a half the market has been really strong for office lea seeing and I think, you know, it’ll continue that way.

10:02 Speaker 1 I’d like to thank Daryl I had love for being here today.

10:05 Speaker 2 Thanks for having me. Great to see you.